If I have found that my tenant has sub-let my property to some other person without my consent, then what can I do to protect my interests?

A tenancy document usually contains a clause that prohibits the tenant from subletting the property to another party. Any subletting by the tenant will be a breach of such a clause and the landlord can institute legal action for compensation.

If the tenancy document does not contain a clause that prohibits subletting, then the mere act of subletting, even without the landlord’s consent, may not be illegal. As a tenancy has the effect of passing the landlord’s interests in the property to the tenant, the tenant may deal with the property in whatever manner (except for any illegal activities or actions which would violate the tenancy document) within the period of the tenancy, including subletting the property to another party.

Based on the same reasoning, the breach of a prohibition clause on subletting will make the tenant liable to the landlord for damages, but may not render the sub-tenancy illegal.

I received a letter from a bank claiming to be the mortgagee of the property that I am renting. The bank claimed that the tenancy document between my landlord and me was made without its consent and asked me to move out of the property. What can I do?

All properly drafted mortgages contain a clause that requires the mortgagor (the landlord) to seek consent from the mortgagee (the bank) before the mortgagor lets the property to another party (the tenant).

If the landlord complies with this requirement, then the bank has notice of the tenant’s presence and cannot evict the tenant even if the bank eventually exercises its power of repossession under the mortgage, such as when the mortgagor fails to make mortgage repayment to the bank. The bank, under such circumstances, will become the landlord and is entitled to receive rent from the tenant.

If the landlord lets the property to a tenant without obtaining the bank’s consent, then the landlord is in breach of the mortgage and the property is liable to be repossessed by the bank. When the bank eventually exercises its power of repossession under the mortgage, which may arise from causes other than the aforesaid breach, the tenant is actually a trespasser (a person who illegally enters or occupies a property without permission from the property owner) on the property and the bank is perfectly entitled to ask the tenant to leave even if the tenant is prepared to pay the rent.

As a mortgage will invariably be registered with the Lands Registry, the tenant is deemed to have notice of the mortgage and its terms. If the bank exercises its power of repossession under the mortgage, then the tenant cannot use ignorance as an excuse. Therefore, before entering into a tenancy document, a tenant should always conduct a land search at the Land Registry to check whether the property is mortgaged. If the answer is affirmative, then the tenant must ensure that the landlord has obtained consent from the mortgagee.

Statutory laws provide little guidance in identifying the duties of maintenance of a property. The Landlord and Tenant (Consolidation) Ordinance does not touch on this issue at all. The Buildings Ordinance ( Cap. 123 of the Laws of Hong Kong) confers power on the Building Authority to declare a building dangerous and to compel the owner to remedy the situation. However, this does not provide much assistance in the case of non-dangerous day to day repairs and maintenance. The Public Health and Municipal Services Ordinance ( Cap. 132 of the Laws of Hong Kong) confers power on specified public officers to require the owner or occupier of a property to cleanse the property. However, this only concerns the hygienic condition of the property and does not provide much assistance in terms of common repairs and maintenance.

In respect of statutory orders issued by government authorities, it is almost invariable that the landlord, as the registered owner of the property, will be responsible for carrying out repairs or maintenance. A tenant who receives such an order should duly inform the landlord so that the necessary steps can be taken as soon as possible.

Regarding the day to day repair and maintenance of a property, the law implies the obligation on the landlord to provide a property fit for human habitation and the obligation on the tenant to use the property in a tenant-like manner (i.e. to use the property in a reasonable and proper manner) and not to commit waste (i.e. not to destroy/damage the property) . Obviously, such implied obligations are rather vague and not very helpful.

Hence, a well-drafted tenancy document that specifies the obligations for repair and maintenance is desirable.

1. In general, is the landlord or the tenant responsible for maintaining and repairing the property?

When dealing with the issue of repair and maintenance, the landlord and the tenant must predominantly rely on the tenancy document to ascertain their respective duties. A commonly adopted approach is that the landlord is responsible for external and structural repairs and maintenance, and the tenant is responsible for internal and non-structural ones. However, such a simple dichotomy can be problematic because the words internal, external, structural and non-structural can have different interpretations under different circumstances. Therefore, a well-drafted tenancy document will try to anticipate and accommodate all potential areas of dispute that are specific to the particular property, and clarify the parties’ duties in details. This also explains why a tenancy document that is drafted by solicitors may consume dozens of pages, whereas a standard form agreement may take only one or two pages.

It will also be quite normal that the terms of the tenancy document impose many obligations on the tenant. This apparent unfairness is actually quite reasonable because the tenant is the “person-in-charge” of the property during the term of the tenancy. As a tenancy has the effect of passing the interests in the property to the tenant, the duty to keep the property in good repair and maintenance passes to the tenant. It is for the same reason that the law implies that the tenant will keep the property in a tenant-like manner and will not commit waste.

It is also common to find in a tenancy document that the tenant’s obligations for repair and maintenance are limited by the phrase “fair wear and tear excepted”. This excuses the tenant from damage arising from the passing of time and the ordinary and reasonable use of the property. A well-drafted tenancy document should also contain a clause which specifies that the landlord’s obligations for structural repairs and maintenance will arise only upon notice of the structural defects. This is reasonable because the landlords, not being in occupation of the properties, cannot be expected to remedy defects of which they are not aware.

On the whole, the answer to the question of who is responsible for repairs and maintenance is to be found in the terms agreed upon by the landlord and the tenant. If there is no written tenancy document or if the particular issue is not tackled by the tenancy document, then the dispute may have to be decided by the Court, which will take into account factors such as the common law duty of “tenant-like” manner, the factual circumstances of the particular dispute, the reasonableness of the parties’ acts, etc.

Landlord’s rights to enter the property

Section 24 of the Landlord and Tenant (Consolidation) Ordinance is the statutory provision by which a landlord may enter the property and effect necessary repairs. A landlord and his servants and agents may:

1. at all reasonable times, enter and inspect the property the subject of the tenancy with a view to ascertaining whether they require any necessary repairs; and
2. after the service (deliver) upon the tenant of 14 days’ notice in writing of intention so to do, enter upon the property the subject of the tenancy and effect all necessary repairs.

The term “necessary repairs” under this ordinance section means any repairs which the tenant would be required to perform were he under covenant with the landlord (legally bound by a contract) to keep the property in a tenantable state of repair. Subject to the terms of the tenancy document or other mutual agreement between the parties, the relevant repairs costs incurred by the landlord may be recovered from the tenant.

2. If there was a fire broken out on a leased property and the landlord has suffered some losses as a result, can the landlord claim against the tenant?

It depends on the terms agreed by the landlord and the tenant in the tenancy agreement. It also depends on the cause of the fire (e.g. was it a pure accident or was it caused by someone’s negligence?).

In practice, a prudent landlord will take out insurance policies to cover the relevant property and household damage. Loss of or damage to household contents such as furniture, decoration, electrical appliances and personal valuables can be insured. A typical example of such kind of insurance is a “Householder’s Comprehensive” insurance (See more in “Insurance” under the CLIC website.

Another important note is that the landlord has a duty to inform the insurance company that the flat/house is rented out to a tenant.

Subject to the terms of the relevant tenancy document, the tenant may also be required to take out proper insurance for the property.

In usual circumstances, both the landlord and the tenant cannot terminate the tenancy before its expiration unless either of them has breached the vital terms of the agreement (e.g. the tenant fails to pay rent or the landlord illegally re-enters the property). However, early termination may be possible with the existence of a valid break clause (See more in Properties Arrangements > Landlord and tenant > Renewal matters .

1. I have let my property to a tenant on a three year term. There are still more than 2 years remaining in the term. However, I note that the rental value of neighbouring properties has risen significantly. Can I terminate the tenancy with the existing tenant and let the property out for a better rent?

A party to a contract is bound by the terms of that contract. Therefore, unless a tenancy document contains a break clause that allows the landlord to terminate the tenancy before the expiry of its term, or there is mutual agreement for an early termination, the landlord is bound by the tenancy document and cannot unilaterally terminate the tenancy with the existing tenant.

2. I have rented a property on a three year term. There are still more than 2 years remaining in the term. However, I note that the rental value of neighbouring properties has dropped significantly. Can I terminate the tenancy with the landlord so that I can get a comparable property for a lower rent?

A party to a contract is bound by the terms of the contract. Therefore, unless a tenancy document contains a break clause that allows the tenant to terminate the tenancy before the expiry of its term, or there is mutual agreement for an early termination, the tenant is bound by the tenancy document and cannot unilaterally terminate the tenancy with the landlord.

A “break clause” from the tenant’s perspective may look like this (for reference only):

Notwithstanding anything herein contained, it is hereby agreed and declared that if at any time after the expiration of one year from the commencement of the Term, the Tenant shall be desirous of terminating this Agreement, then the Tenant shall have the right to terminate it by giving not less than two months prior written notice to the Landlord, provided that the notice is received by the Landlord at least two months prior to the date of termination stated therein, or by paying to the Landlord two months rent in lieu of such notice, provided always that the operation of this clause is without prejudice to the rights and remedies of either party against the other in respect of any antecedent claims or breach of the agreements, stipulations, terms and conditions herein contained.

If the tenancy document does not contain a break clause, then neither the landlord nor tenant can unilaterally terminate the tenancy. The only option open to a tenant who wants to end a tenancy before the expiry of the agreed term is then to offer to the landlord to surrender the tenancy. Subject to negotiation between the parties, the tenant must usually pay a sum in exchange for the landlord’s acceptance of the surrender.

Supposing that an existing tenancy is about to expire, the landlord and the tenant can commence their negotiation on whether to renew the tenancy.

In the past, a landlord was in most cases bound to renew a tenancy for a domestic property with an existing tenant. However, the law on this issue underwent a substantial change on 9 July 2004. In essence, the landlord is not bound to renew a tenancy with the same tenant unless there is a written agreement to the contrary. This applies to both domestic and non-domestic properties.

However, if a tenancy document (whenever created and whether domestic or non-domestic) contains an “option to renew” clause, then the tenant will be entitled to a right to renew the tenancy.

A tenancy document may provide an option for the tenant to renew an existing tenancy. The option is an offer by the landlord to grant a further tenancy upon expiry of the existing tenancy. For the option to come into effect, there must be acceptance on the part of the tenant. The clause in the contract usually requires the tenant to give a written notice to the landlord not later than a date specified in the contract. The clause may also contain reference to the terms of the new tenancy document, such as on the same terms as the existing tenancy.

Subject to the agreement between the parties, an “option to renew” clause may look like this (for reference only):

It is hereby agreed that if the Tenant wishes to take a further term of two years from the expiration of the Term and at least six months prior to such expiration gives the Landlord written notice to that effect and has paid the rent and all monies hereby reserved and reasonably performed and observed the terms and conditions on its part herein contained up to the expiration of the Term, then the Landlord will let the Property to the Tenant for a further term of two years from such expiration at a new monthly rent and subject to the same terms and conditions as are herein contained except this clause for renewal.

1. What is the difference between an “option to renew” and a “break clause”?

An option to renew confers on the tenant a right to continue to rent the property after the expiry of the current term, i.e. to renew the existing tenancy. With an option to renew, the tenant obtains a security of tenure and the landlord is somewhat secured with continual rental income. As an option to renew represents a legal interest in land and affects the principles of notice and priority, the relevant tenancy document should be registered even if the tenancy period does not exceed 3 years.

A break clause , in contrast, confers rights to a party to prematurely terminate a tenancy after a certain period has elapsed or upon the occurrence of certain incidents. That is to say, a party is allowed to break the agreement before the expiry of the original term.

2. A landlord and a tenant intend to renew an existing tenancy. Except the rent, all of the terms are agreed. Is there any way that the parties can resolve the problem amicably?

The concept of “prevailing market rent” may be helpful under such circumstances. To find out the prevailing market rent of a property, the parties can jointly appoint an independent professional valuation surveyor to do the job, the decision of whom will be final and binding on the parties. The major advantage of this exercise is that the issue can be resolved amicably without endless and unfruitful negotiation. In practice, of course it will only be worthwhile to retain a professional valuation surveyor if the property has a substantial rental value.

Scenario

Mr. B intends to rent a commercial property from ABC Company to run a retail shop. Both parties have verbally agreed on the major terms of tenancy including the rent and the tenancy period. The landlord (ABC Company) has instructed a solicitor firm to handle the relevant tenancy documentation.

1. Mr. B received a Draft Tenancy Agreement that was prepared by the landlord’s solicitors. It seems that many terms are favourable to the landlord. Is this usual in tenancy dealings? What can Mr. B do to protect his interests?

As the landlord’s solicitors drafted the Tenancy Agreement it is inevitably prejudicial to the tenant’s interests. The best way for Mr. B to tackle this situation is to retain a lawyer to assist him to negotiate for more favourable terms (or to strike out unfavourable terms).

Anyone who has read a usual tenancy document will probably be amazed by the unbalanced proportion of obligations to be observed by the parties. The landlord must only comply with a few obligations, such as providing quiet enjoyment, repairing the roof and external walls, and paying government rent. In contrast, the tenant must comply with many dos and don’ts. However, a tenant should recognize that the situation may not be as bad as it seems. As a tenancy has the effect of passing the interests in the property to the tenant, the duty to keep the property in good repair and maintenance also passes to the tenant. Hence, it is quite normal that a tenancy document, even after negotiation between the solicitors for both parties, still seems to impose many obligations on the tenant. This apparent unfairness is actually quite reasonable because the tenant is the “person-in-charge” of the property during the period of the tenancy.

2. Subsequent to the signing of the Tenancy Agreement, the parties agreed to amend certain terms of that agreement. Can they simply mark the amendments on the existing agreement or do they have to enter into a new agreement?

In general, the landlord and the tenant can mark the amendments on the existing Tenancy Agreement and then place their signatures next to the amendments. The parties can also enter into a supplemental agreement that incorporates all of the amendments rather than putting numerous amendments onto different parts of the existing agreement.

However, if an amendment is so substantive that it alters the nature of the Tenancy Agreement, then the parties may have to enter into a new agreement. For example, if the period of a tenancy is extended, then a new tenancy is actually created and the parties may have to enter into a new agreement and comply with the necessary legal requirements. If the rent is increased, then additional rent is also chargeable to stamp duty. The number of potential legal consequences is as infinite as the number of imaginable amendments. The parties should therefore seek legal advice before they commit themselves to any amendment.

3. After having used the property for a certain period, Mr. B believed that the property needed substantial renovation. He asked the landlord to do the renovation but the landlord asked him to contribute to the costs. Who should be responsible for these renovation costs?

The word “renovation”, in its ordinary sense, connotes the meaning of the decoration and adornment of a property. It may not cover the repairs or maintenance that are essential to the occupation of the property, such as repairing a cracked wall or ceiling. Furthermore, a Tenancy Agreement is likely to specify that the property is let on an “as is” basis, which means that the tenant is aware of the conditions of the property when the tenancy commences. Therefore, unless the Tenancy Agreement provides otherwise, Mr. B is not entitled to request the landlord to renovate the property.

Generally, it can be said that neither the landlord nor the tenant has a duty to renovate a property. As a tenant is the factual occupier of a property, it is reasonable for the tenant to bear any costs of renovation. However, the parties can negotiate between themselves on any proposal for renovation. A landlord will probably be more willing to bear the costs of renovation in cases in which the tenant has been occupied the property for a long time and has committed to continue renting the property.

4. Mr. B did not pay rent for 2 months. What can ABC Company do to recover the outstanding rent and/or to get back the property?

ABC Company, as a landlord, should also be cautioned that it should not use any illegal measures to get back the outstanding rent or the property (e.g. by breaking open the door without a court order ). Any person who unlawfully deprives a tenant of occupation of the relevant premises may commit an offence and may be liable to a fine or even imprisonment.

For more details, please refer to Properties Arrangements > Landlord and tenant > How to recover the outstanding rent and get back the property? > Q1 .

5. Mr. B settled all of the rental arrears, but ABC Company told him that it intends to sell the property. The company assured Mr. B that it would inform him of any potential purchasers of the existing tenancy. However, Mr. B was told that he should allow potential purchasers to enter and view the property. Can Mr. B refuse this?

A well-drafted tenancy document will invariably include a clause under which the landlord covenants to give quiet enjoyment of the property to the tenant. Quiet enjoyment, in this context, does not simply refer to freedom from noise, but extends to freedom from interruption by the landlord. Even if the tenancy document does not contain such a clause, then the tenant’s right to quiet enjoyment is implied by law. Therefore, unless the tenancy document expressly provides that the tenant must allow a potential purchaser to view or inspect the property (usually at certain time before the tenancy expiration date), the tenant is fully entitled to refuse the landlord’s request for viewing or inspection.

In fact, the landlord should have notified the potential purchaser about the existence of the tenancy and the property should be sold “subject to tenancy”. Purchasers who buy under such circumstances should understand that they are probably buying properties without the right to view and inspect them.

6. There were only two months left in the period of tenancy. Mr. B refused to pay the rent for the final two months and told ABC Company that it could forfeit the deposit (which is equivalent to two months of rent) as a payment of the outstanding rent. Should ABC Company accept this?

A tenancy document usually specifies that the tenant must pay a deposit to secure the performance and observance of the tenant’s covenants under the tenancy document, such as to pay rent, to keep the property in good condition, to execute repair and to comply with the relevant laws. The agreement to pay rent is only one of many covenants that are made by the tenant. The landlord, in most circumstances, will not know whether the tenant has performed and observed such covenants until the recovery of the possession of the property.

Upon regaining possession of the property, the landlord may find that pipes are blocked, walls are painted in weird colours, windows are broken, the refrigerator is gone, trash is left all over the property, etc., and that the tenant cannot be located anymore. The deposit will not be able to cover the aggregate of the unpaid rent and the expenses incurred to refurbish the property. It is therefore unwise to accept the tenant’s proposal to substitute the rent with the deposit.

7. After the expiration of the tenancy, Mr. B stays in the property and pays rent at monthly intervals and ABC Company continues to accept that rent. Will the terms of the expired Tenancy Agreement continue to bind the parties?

Upon the expiry of a tenancy, the original Tenancy Agreement becomes obsolete. The terms and conditions specified in that agreement do not bind the parties any more. If the “tenant” continues to stay at the property and the “landlord” makes no objection, the relationship between them will evolve into a tenancy at sufferance: that is to say, the “landlord” suffers the presence of the “tenant” at the property. Strictly speaking, this is not a tenancy at all because the “landlord” has not expressly agreed to let the property. The “tenant”, in this sense, is merely an occupier. Tenancy at sufferance is ambiguous in law because both the “landlord” and the “tenant” are uncertain of their rights and liabilities. In such circumstances, the parties should as soon as possible enter into a new tenancy document that spells out clearly their respective rights and liabilities.

1. Before signing the formal tenancy agreement or lease, a tenant may sometimes be asked by a landlord to sign a document called “agreement for lease” or “provisional tenancy agreement”. What are the consequences of signing this document?

By signing an agreement for lease /provisional tenancy agreement, the intending landlord agrees to give, and the intending tenant agrees to take, a lease in the future. The agreement for lease/provisional tenancy agreement is a contract. It must, therefore, satisfy the requirements of a contract. An agreement for lease/provisional tenancy agreement is legally binding upon the parties to the agreement. If such an agreement is signed and one party subsequently refuses to sign the formal lease or tenancy agreement, the other party can apply to the court for an order of specific performance. That is, to apply for a court order to compel the defaulting party to fulfil the obligations as stipulated on the agreement.

For other things that you need to know before signing a Tenancy Agreement or a Lease, please visit Properties Arrangements > Landlord and tenant > Things that you need to know before signing a Tenancy Agreement or a Lease .

2. Some tenancy documents must be registered with the Land Registry but some do not. Why?

The major purpose of registering documents at the Lands Registry is to notify the public of all documents affecting lands in Hong Kong and to set up a priority system regarding documents affecting a particular property. Once a document is registered, the public is deemed to have notice of its existence and its content. The date of registration also affects the priority of a party’s rights in a particular property.

A tenancy document, being an instrument affecting land, is of course registrable at the Lands Registry. However, the Land Registration Ordinance provides that the principles of notice and priority do not apply to “bona fide leases at rack rent for any term not exceeding three years”. A document that creates a tenancy for a term of more than three years (i.e. a Lease) should therefore be registered, otherwise it is prone to be defeated by successors in title of the landlord and will lose its priority against other registered documents that affect the same property.
In contrast, a document that creates a tenancy for a term of three years or less (i.e. a Tenancy Agreement) does not gain or lose anything by registration. However, if a Tenancy Agreement contains an option to renew the existing tenancy, it should be registered even though the term of the tenancy does not exceed three years.

If you want to know how the parties handle the document after signing a Tenancy Agreement (or a Lease), please visit Properties Arrangements > Landlord and tenant > How should the parties handle the signed Tenancy Agreement/Lease? .

3. If my tenant conducts criminal activities in my property, what problems will I face?

If the landlord knows that the tenant is using the property for criminal activities, e.g. as a gambling place or a vice establishment, and does nothing about it, the landlord could face criminal charges. The consequences will not be limited to monetary loss and damages, but may include a criminal record and imprisonment. Hence, a landlord who finds a tenant using the property for criminal activities should at once report the case to the police.

A property that is used for other non-authorised purposes may also create trouble for its owner. To know more about this, please visit Properties Arrangements > Landlord and tenant > Regulations on using or occupying a leased property > Q2 .

4. In general, is the landlord or the tenant responsible for maintaining and repairing the property?

When dealing with the issue of repair and maintenance, the landlord and the tenant must predominantly rely on the tenancy document to ascertain their respective duties. It is quite normal that the terms of the tenancy document impose many obligations on the tenant, but the tenant’s obligations for repair and maintenance are limited by the phrase “fair wear and tear excepted”. This excuses the tenant from damage arising from the passing of time and the ordinary and reasonable use of the property. A well-drafted tenancy document should also contain a clause which specifies that the landlord’s obligations for structural repairs and maintenance will arise only upon notice of the structural defects. This is reasonable because the landlords, not being in occupation of the properties, cannot be expected to remedy defects of which they are not aware.

For more about repair/maintenance obligations, please visit Properties Arrangements > Landlord and tenant > Repair/maintenance obligations .

5. If the tenant refuses to pay the rent for the final two months of the tenancy, and suggests the landlord to forfeit the deposit (which is equivalent to two months of rent) as a payment of the outstanding rent, should the landlord accept this?

A tenancy document usually specifies that the tenant must pay a deposit to secure the performance and observance of the tenant’s covenants under the tenancy document, such as to pay rent, to keep the property in good condition, to execute repair and to comply with the relevant laws. The agreement to pay rent is only one of many covenants that are made by the tenant. If, upon regaining possession of the property, the landlord finds that pipes are blocked, walls are painted in weird colours, windows are broken, the refrigerator is gone, trash is left all over the property, etc., and that the tenant cannot be located anymore, the deposit will not be able to cover the aggregate of the unpaid rent and the expenses incurred to refurbish the property. It is therefore unwise to accept the tenant’s proposal to substitute the rent with the deposit.

If you want to read more case illustrations regarding landlord and tenant, please visit Properties Arrangements > Landlord and tenant > Case illustration .

6. What are the major government departments that are responsible for governing tenancy matters in Hong Kong? To which department(s) should a party go to if a tenancy dispute/problem arises?

The Rating and Valuation Department is responsible for administering the Landlord and Tenant (Consolidation) Ordinance ( Cap.7 of the Laws of Hong Kong). It also provides services regarding tenancy matters. The Department answers public queries on tenancy matters through a telephone hotline at 21508229.

The Lands Tribunal is the major body responsible for handling tenancy disputes. Unlike the Court, a tribunal is characterized by informality. The presiding officer plays a more intervening role and is more ready to discuss the issues with the parties.

If the dispute is purely about a monetary claim of $50,000 or less, then the claimant can make the claims at the Small Claims Tribunal. If the amount of the claim is higher or the relevant legal issue is more complex, then the parties can also bring the case to the District Court or the Court of First Instance of the High Court.

If you want to know how to recover the outstanding rent and get back the property, please visit Properties Arrangements > Landlord and tenant > How to recover the outstanding rent and get back the property? .